THE dramatic plunge in the Japanese stock market this week is a set back for investors with funds tied up in Nikkei based tracker bonds.

As a result of the collapse, Irish investors who over the past 18 months are estimated to have put up to £25 million in the Japanese stock market through these tracker bonds have seen their returns hit.

Those who took out a bond early last year have least to lose, with the Nikkei now back at around the 18,000 levels at which they would have bought into the market.

Investors who channelled money into these funds later in the year will take a bigger loss, with most likely have locked into the market when it was as high as 22,000.

None of these bonds are understood to be due to mature in the near future.

Investors in more diversified tracker bonds - those which track a number of international markets may also have some small exposure to the Japanese market, but are unlikely to see any substantial reduction in their overall investment returns as a result.

Industry sources yesterday insisted that the Japanese market was still a "reasonable" bet in the long term, stressing that investors could yet see a similarly sharp rise in the Nikkei before most of these bonds expire.